Wage Stagnation Era Begins: Productivity-Pay Gap Opens as Union Power Collapses

After three decades of wages rising in tandem with productivity (1948-1979), the fundamental relationship between worker productivity and compensation breaks down completely beginning in 1979, marking the start of 45+ years of wage stagnation despite continued productivity growth. Between 1948-1979, productivity grew 108% while wages grew 93%—nearly parallel tracks. But from 1979-2024, productivity increases 80% while median wages grow only 29%, less than 0.6% annually, capturing just one-third of productivity gains.

This productivity-pay divergence coincides precisely with the beginning of systematic union destruction: union membership peaks at 27% in 1979 before collapsing to 10% by 2025. Economic Policy Institute research identifies the policy causes of wage suppression as employer and capital-owner efforts to undercut worker bargaining power through deregulation, corporate-led globalization, minimum wage erosion, deunionization, macroeconomic policies tolerating excess unemployment, and tax cuts for high earners.

The result is the largest upward redistribution of wealth in American history: productivity gains that would historically have been shared with workers through rising wages are instead captured entirely by shareholders and executives. Where workers’ labor once entitled them to share in the economic growth they created, the destruction of union power enables capital to claim 100% of productivity improvements. This wage stagnation is not inevitable or driven by economic forces—it is the direct result of coordinated policy choices including Taft-Hartley restrictions, PATCO strike-breaking, ALEC right-to-work campaigns, NLRB regulatory capture, and judicial protection via Federalist Society-vetted Supreme Court decisions. The 1979 inflection point marks when organized labor’s power to demand wage increases matching productivity growth is systematically destroyed.